KOSPI Index Plunges Over 6% as Tech Giants Tumble Amid AI Investment Worries and Tariff Threats

TLDR

• The KOSPI benchmark index plummeted more than 6% during Friday trading, touching an intraday bottom of 6,650.41 points
• Memory chip manufacturers SK Hynix and Samsung Electronics plunged 6-10%, driving the market downturn
• Concerns about excessive AI investments intensified after Alphabet reported negative free cash flow for the quarter
• Initial fears over a 12.5% U.S. tariff on Korean goods pressured markets before a 15% ceiling was later confirmed
• Hyundai Motor tumbled 8% following disappointing Q2 financial results

South Korea’s primary stock index experienced a dramatic plunge on Friday, shedding more than 6% in a brutal trading session. The massive selloff was fueled by substantial losses across semiconductor companies and mounting anxieties about artificial intelligence capital expenditures combined with U.S. tariff developments.

KOSPI Composite Index (^KS11)

The benchmark touched an intraday bottom at 6,650.41 points before staging a modest rebound to 6,751.49 following official confirmation from Seoul that Washington would maintain an existing trade agreement limiting tariffs to 15%.

This downturn mirrored a wider Asian market rout. Japan’s Nikkei 225 declined 3%, while Hong Kong’s Hang Seng shed more than 1%, and mainland China’s Shanghai Composite retreated 0.87%. Rising military tensions between Washington and Tehran contributed additional uncertainty throughout the Asia-Pacific region.

Semiconductor Sector Bears the Brunt

Samsung Electronics and SK Hynix emerged as the heaviest weights dragging down the KOSPI. Shares of both memory chip giants tumbled between 6% and 10% during the session.

The selloff came on the heels of a punishing overnight session for American technology stocks. Earnings reports from Alphabet and Tesla revealed both tech titans were pouring massive capital into artificial intelligence infrastructure, triggering investor doubts about the financial viability of such aggressive spending strategies.

Alphabet’s quarterly report proved especially troubling. The search giant reported negative quarterly free cash flow for the first time in its history while simultaneously increasing its capital expenditure guidance for the full year.

This development alarmed investors who have been seeking tangible evidence of returns on AI investments. The growing concern centers on whether AI-related spending is now eroding major technology companies’ profitability rather than enhancing it.

Both Samsung and SK Hynix had enjoyed considerable gains from robust AI-fueled appetite for memory semiconductors throughout the previous year. However, this same growth trajectory left them particularly vulnerable when market sentiment reversed.

Leveraged exchange-traded funds in Korea linked to these two chipmakers further exacerbated the volatility, magnifying the session’s dramatic price swings.

Automaker Struggles and Tariff Uncertainty Compound Losses

Hyundai Motor dropped 8% after delivering second-quarter results that fell short of analyst expectations. The automaker has been grappling with U.S. trade barriers as an ongoing challenge in recent quarters, and fresh tariff announcements darkened that already cloudy outlook.

Washington unveiled a 12.5% tariff targeting South Korea along with several other trading partners. This announcement hammered export-dependent industries before Seoul successfully confirmed the 15% cap arrangement later in the trading day.

The KOSPI ultimately settled at 6,690.62, registering a 5.72% decline for the session.

The post KOSPI Index Plunges Over 6% as Tech Giants Tumble Amid AI Investment Worries and Tariff Threats appeared first on Blockonomi.